Institutional investors are pumping more capital into residential real estate

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Institutional investors have started to put more money into residential real estate due to better selling momentum in this part of the market.

The combination of key factors such as record-low interest rates, pandemic-driven homeownership awareness, developer incentives and increased buyer confidence bode well for the housing sector.

In addition, institutional investors take recovery into account when investing their money in the right projects and places.

Since the Real Estate (Regulation and Development) Act, 2016, transparency in residential real estate has increased. This gives institutional investors more confidence as they increase their exposure to this market.

“We’ve seen a lot of consolidation in this space over the past few years and there’s a growing sense that the sector has been largely cleaned up. This, coupled with the strong residential demand we are seeing, has brought a lot of investors back into the market,” said Lata Pillai, Managing Director and Head, Capital Markets, India, JLL.

“Strong hiring over the past 18 months and rising salaries in tech, healthcare and other sectors should keep momentum for home sales and institutional investor interest in the sector.”

According to her, one of the distinguishing features of investments in 2021 was the comeback of the residential sector, which recorded the second highest share of total Indian property investments.

In 2021, the housing sector received 2.3 times more money than in 2020. That is $1.08 billion compared to $460 million in 2020.

Against the background of the increasing demand for residential real estate, real estate developers are also showing a willingness to invest in land and even undertake joint developments.

“We are witnessing the same activity as in 2014-2015 in terms of investments in fund-backed land. Until last year, this was through the acquisition of incomplete projects, and now through development management agreements. Institutional funds expect demand for residential real estate to remain buoyant for the next four years as the residential cycle typically lasts 5-7 years,” said Gorakh Jhunjhunwala, Managing Director of Meraqi Advisors.

The transactions concluded in the last few quarters also point to sustained investment momentum in the residential segment.

Brookfield Asset Management recently invested over 1,000 crore in Hyderabad-based real estate developer INDIS’ five residential projects under construction to expand its mid-market residential project portfolio in the urban areas of southern India.

Global alternative investment firm PAG has reached an agreement to invest around £740m in two projects owned by real estate developer Kalpataru Group. In addition, Oaktree Capital Management has also invested £425 billion in Hubtown’s 25 South, a prime luxury sea-view development set on 5.3 hectares of land in the Prabhadevi district of Mumbai.

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